Smart Answers

Cautious Plans to Expand After a Grueling Year

Chris Wrightsman and his business partner, John LaRocca, wondered if they'd have to strap on their tool belts and go back into the field after 15 years in management. Bruce Rigney worried about losing his family-owned company. Sean O'Neill questioned his decision to start a home-based consulting firm in 2008. As it was for so many, 2009 was a rough year for these three entrepreneurs. But with the dawn of 2010, all are optimistic that they have survived the worst. They are ready to begin growing again. Several surveys of entrepreneurs show that confidence about 2010 appears to be growing, albeit cautiously. The Discover (DFS) Small Business Watch, a monthly index of companies with less than five employees, showed that fewer micropreneurs surveyed in December felt that the economy was getting worse, compared to November's numbers. And 22%—an increase from 19% in November—said they expect business to pick up in the next six months. The monthly Small Business Scorecard survey done by SurePayroll, an online payroll services provider, last month showed an even bigger improvement: Two-thirds of small business owners surveyed reported that they expect their revenues to increase in 2010. The survey also showed that hiring at small companies was up 3.4% for 2009, with more entrepreneurs hiring new employees in December rather than bringing on contract workers. "I'm looking forward to 2010. I think it's going to be a good year for us," Wrightsman says. His assessment is a far cry from a year ago, when LaRocca Inspection Associates was struggling to stay afloat. The property inspection service, based in Sunland, Calif., began feeling the pinch in mid-2008, when the California real estate market crashed. "No one was buying homes, no one could get loans, and one-third of our business just dropped off the map," recalls Wrightsman, who is CEO. He laid off 20% of the firm's inspectors and 30% of its administrative employees, bringing the company, founded in 1994, down to 32 employees. After a best-ever year, near-collapse"The thought always crosses your mind as a business owner: Will we lose the company? I inspected for several decades and so did my business partner. We wondered if we'd have to go back into the field and do inspections ourselves," Wrightsman says. That kind of worst-case scenario also occurred to Rigney, who founded Rigney Graphics, at his dining room table 28 years ago and plans to pass it down to his son and three grandsons. "I figured I would lose the whole business. We were scraping together money for rent," Rigney says. The downturn was something of a shock, he says, because 2008, when he had $910,000 in revenue, was his best year ever. "We thought we were impervious because normally, in a mild recession, our clients promote more and we pick up some higher-end clients looking for bargains," Rigney says. "In January, I started to feel the fear and anticipation of horrible things happening in the future," he says. But with plenty of big clients and lots of work, he didn't worry too much. In 2009, however, his big clients shut down, deciding to stop producing newsletters, product sheets, and advertising that they had ordered steadily in the past. Other companies took their graphics needs in-house to save money. In April, a combination of circumstances hit the company hard. "I got quite ill and was out for the better part of two months," Rigney recalls. During his absence, employees focused on a planned office move. His daughter-in-law, who had handled sales for six years, went on maternity leave. With the drastic downturn in business and the absence of new sales, the company went into a tailspin. local consulting saved the firmO'Neill did not see his business drop in 2009, but he wondered whether he could sustain the business development consulting firm O'Neill Productions that he started out of his Montclair, N.J., home in 2008 after being laid off from a corporate job. O'Neill had two major, distantly located clients at the beginning of 2009, but when their contracts ended midyear he had a tough time finding new clients because of the downturn. That's when he worried about keeping the company going and began reaching out to his local networks to find additional work closer to home. "I marketed myself as a consultant to businesses with a Web aspect that needed social media and marketing help," he says. "That's a tough sale in a climate where companies don't think they have enough money to keep going, let alone bring in someone from the outside." It was a combination of creative thinking, local hustle, and sheer will power that saved him, O'Neill says. "When I started to finish my initial consulting projects with clients from far away—Singapore and California—I reached out to local contacts. These were real people in my network, from the YMCA to a men's support group," he recalls. One contact's referral led to a consulting job for William Paterson University that got him through 2009. "That is what saved me from utter ruin this past year," O'Neill says. "I guess what I had to do was remove myself a bit from the temptation of trying to find a client on the Web and really work my local network." O'Neill ended the year with three clients, $175,000 in revenue, and hopes for his prospects in 2010. New policy: close every prospectRigney, too, is cautiously optimistic about the future of his nine-employee firm, for which he projects $930,000 in revenue for 2010. "Clients have become good friends. Losing the business would be a betrayal not only for my family, but for them," he says. Desperate last spring, Rigney made some tough decisions. He backlogged his own salary, laid off a trainee, and did not replace his daughter-in-law, taking over sales himself. He also established a new policy: The company would close every prospect. In plusher years, Rigney's firm could pick and choose its clients, favoring easy-to-work-with companies that had well-defined marketing and branding plans. In 2009, Rigney says, he wasn't turning down any paying customers. "I decided that we would meet customers' price points and do whatever they could afford," he says. That often meant working with startup entrepreneurs who not only needed brochures and Web sites but marketing help, copywriting, and business development. "We backed up the production cycle and started working on business concepts, advertising copy, research, and surveys, all of which I did years ago," Rigney says. Instead of turning down potential clients who weren't ready for his services, Rigney simply did the work they needed to get up to speed. "People sort of woke up"He referred clients to discount printers so that they could pay him enough to meet his profit margin. "This way, more people could use our services. And it's been very exciting working with people who are driven to get their companies off the ground," he says. In addition to closing every deal—save for a would-be actor who had $150 for a Web site—Rigney also doubled his own marketing efforts. By early fall, inquiries picked up and clients began to return. "People sort of woke up and realized they had to save their businesses. All of a sudden, they decided to invest in them again," he says. Clients who had opted for in-house graphics departments returned and private investment began flowing, freeing up some budgets for Web site overhauls. Rigney is still forgoing his salary and he's stuck to the "close everything" policy. He will also continue to handle sales himself for the time being. But the company, which had $740,000 in revenue in 2009, is back in the black and bidding on an extremely large job. If they get it, Rigney says, he'll bring in some freelance contractors to help, but isn't considering hiring more full-time staff in the near future. LaRocca Inspections, meanwhile, has rehired several of its laid-off inspectors and a new administrative employee. With $3.9 million in revenue in 2009, it finished up about 8% over 2008, due to the surge of property inspections late in the year and the cuts the company had made earlier in 2009. In 2010, Wrightsman expects revenue to continue growing at 8% to 10%. "We're looking forward to bringing on another new employee in the spring," Wrightsman says. geology, termites, and foundationsThe firm changed its marketing strategy after its database of 12,000 Southern California real estate agents dropped to 8,000 early in 2009. "We cut our expenses, our inspectors offered to work extra days and we sort of changed our whole attitude. We knew we had to pull out of this somehow," Wrightsman says. Instead of relying on referrals from real estate brokers, the company marketed its services directly to homeowners through online social media and networking. "We got ahold of everyone we knew in the inspection arena, from geology to termite to foundation inspectors. We came together in a meeting and decided to all work together. We were able to funnel a lot of work to those people when we started asking clients if they needed specialized services. As they piled on more work, they gave us more clients," he recalls. Helped by the first-time-homebuyers' credit and a rebound in real estate, what would normally be a slow summer looked better than average in 2009. "We recognized it was better than most summers. By the end it was much better than most summers, and in the fall business kept increasing," Wrightsman says. Advertising—both online and in local print publications—and sponsoring charity events paid off for the inspection service. As 2010 starts off, Wrightsman is just glad to have survived 2009. "I remember being hit by a recession in the early '90s, but it was not nearly this bad. This was the worst I've seen in Southern California—ever."

Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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